After noticing some economic changes, you may have probably responded by making some changes to the internal structure of the business. In the business circles, restructures can either be carried out well or poorly.
You may find that some organizations do not operate the way they used to even when the economic outlook brightens. An organization needs to restructure properly for it to adapt to any changing landscape.
That is why it is crucial to follow these seven principles that will enable you to restructure successfully and avoid unnecessary complications.
Alignment of structure to strategy
Alignment to a strategy is what all the restructures are geared towards. However, a large number of businesses do not grasp this fact even if it is common. For instance, if the local marketing conditions are unfavorable, then changes should be pointed towards the marketing functions and local sales.
Reduction of complexity
Complexity is simply costly. The added complexity cost, whether complex transactional processes, a complex product offering or complex organizational structure, can surely drag performance.
Some considerations in designing the organizational restructure that can enable you to mitigate complexity.
- Minimize matrices use which measures overheads and lack of staff direction.
- Reduce the complexity of leadership roles.
- Design a clear structure before placing the personnel. Complexity is added when organizational redesigns compromises on the line management preferences and strategic intent.
Focusing on core activity
Before you restructure the roles, remove any inefficiencies as you enhance the core objective. Getting a detailed ‘task by role’ understanding will enable you to know how people are working. It will ensure no value-added activities will be discarded in the process of removing a particular role. Likewise, during restructuring time, duplications and redundant activity will be easily removed.
Creation of feasible roles
After restructuring, usually fewer people are left to undertake the same work so as to ensure you don’t overload roles. A business person ought to have a good understanding of the employees’ workload whenever you intend to restructure to reduce the headcount.
Through that understanding, you will be able to design roles that are neither too light nor too heavy. In addition, the person designing the role should consider realistic skills groupings. Know that you can reduce the durable candidates’ pool when you pack a role with too many skills that are distinct.
Ensure Managers supervisory load and employee own work balance
When it comes to restructures, leadership loading can sometimes be troublesome. An organization can fall into significant problems such as an increase in output requirements makes managers unable to focus on leadership tasks.
For instance, staff will become disengaged when the coaching and mentoring time is reduced implying that managers have more amounts of time in resolving staff errors whenever they arise. Essentially, you will need to balance these three elements to make sure that the management is loaded appropriately:
- The number of directly supervised or managed staff.
- Staff performance ability when there is no supervision.
- Apart from the leadership activity, the managers ‘own work’ amount.
Implementation with clarity
After implementing the initial restructure, there is usually a confusion that can last from the first weeks to a couple of months. The business owner should clarify appropriate roles and responsibility from the start and identify all decisions, tasks, and activities that enable effective operation. To enhance specific accountability, make it clear who is responsible for what.
Maintenance of flexibility
Ensure that your resources are not stagnant so that they can be utilized easily. There needs to be the flexibility of resources for at least the first few months especially where organization change is significant. Some turning room should be left in your staffing even as you make the business operate efficiently. It not only the staff members that be flexible but also the same should be applied to staff capability.
To maintain smooth operations, some room should be left in the new structure for the leadership team to respond to any capability gaps. For staff to familiarize with the roles, you need to temporary use contract resources and to stage transition so that there are fewer capability gaps at each time.
Questions to ask while restructuring
Before changing the business structure, there are a couple of questions to be asked.
Why is a business structure change necessary?
To ensure that you implement a new structure that caters to the business need you will have to understand the need for restructuring.
What structure change do you intend to adopt?
Evaluate each potential structure through checking the pros and cons. Later decide which business structure will suit the current situation.
Is there a business plan for implementing the new structure?
It is not enough to purchase an existing business or expand the current one. A business plan is necessary to highlight the new or proposed structure as well as explain it business objectives and goals.
Is a new ABN application a necessity?
It is advisable to check the Australian Business Register website for more information on how to register. Sometimes, a new Australian Business Number (ABN) is necessary for most business structure changes.
Do you require a new trademark or business name?
In case you need to change any registered trademark or logos you will have to contact IP Australia. Transference of your business name with AISC is also a necessity.
Do you need to create a corporate governance structure or partnership agreement?
The terms and conditions should be stated with clarity in a case where stakeholders are added to the business for instance which might convert a sole trader to a company or partnership. The term will highlight some things like decision making, responsibilities, liability, a percentage of ownership, etc.
Any other additional agreements that are in place?
When changing the business structure, there some other agreements that should be considered especially if they are companies and trusts. I case you are unsure about some of those agreements, you will have to take a visit to the Advisory Services or contact your accountant.
Are there any tax obligations changes you need to account for?
How much tax you report or pay will definitely be affected by the business structure change. To know how the business structure might affect your tax position, kindly visit the Choosing your business structure page on the Australian Taxation Office (ATO) website.
Are you aware of what to be transferred?
For instance, it is crucial to know that in itself a partnership is not a legal entity when you engage yourself in a partnership. You, therefore, have to apply for a new business ABN and transfer the business name to yourself if you intend to restructure your business so as to run as a sole trader.
All-in-all the restructuring process is a crucial phase of a business that gives it the opportunity to revitalize its activities. If you engage some of the discussed principles and examine the business with the shown questions, you will be able to successfully restructure your business.